Employers NIC being deducted from my wages.

WolverineSW11

A bit complicated this one (it seems to many other people, but not me).
I recently worked for a company for 2 years & 3 months on the same site.
I was forwarded to the placement by a council run agency, they only supply people to job interviews, not actually handle any pay, nor use a payroll company.
I was officially handled by an agency that paid me through a payroll company.
On my wage slip the 'Employer NIC' was being deducted at the same time as the payroll's fee, then my personal tax & NI was then deducted from the rest.
When I queried the employers NI being deducted from my wages I was told that I was their 'employer', employing them to do my payroll. Yet when I received my P60, where it had the box for employer, their name was there, not mine. So they can't be my employer and employee at the same time.
Now after doing some digging around online I have found out that to take the employers NIC out of the wages, the agency needs to add an 'uplift' to the wages to compensate the payroll company for deducting the amount. No such uplift was in my wages, just the hourly rate that was broken down to basic pay, holiday pay and 'additional pay' , that was explained as bonuses accrued.
I have tried to find out how I can claim back all the money deducted, but can't seem to find any clear and precise guidance. The amount involved is roughly £6K, money that should rightfully be mine, less my personal tax & NI.
Can anyone point or guide me in the right direction?

penners324

Either the company you worked for or the company who paid you. 

Worth getting your contract of employment to see what it says.

Sandtree

When you work for an umbrella company your hourly/daily rate has to cover all employment costs, you will normally see a fee charged by the umbrella that covers their time/efforts, insurances and profit and then all of the HMRC costs including both employee and employer taxes/NI.

So if you've agreed £20 an hour with the client or agency then its £20 per hour that goes to the umbrella... there is no other money being passed across to cover the employers NI or the PL insurance etc and the umbrella company has no other revenue stream than your £20 per hour.

In some circumstances clients or agencies may agree to uplift your rate to reflect these costs but thats generally when you've been with them for a while as self employed or via your own Ltd and they've now required that you go via an umbrella due to IR35 or such and therefore have offered to share the pain with the rate increase. This is the exception not the norm.

Sandtree

Jillanddy said:

Sandtree said:

When you work for an umbrella company your hourly/daily rate has to cover all employment costs, you will normally see a fee charged by the umbrella that covers their time/efforts, insurances and profit and then all of the HMRC costs including both employee and employer taxes/NI.

So if you've agreed £20 an hour with the client or agency then its £20 per hour that goes to the umbrella... there is no other money being passed across to cover the employers NI or the PL insurance etc and the umbrella company has no other revenue stream than your £20 per hour.

In some circumstances clients or agencies may agree to uplift your rate to reflect these costs but thats generally when you've been with them for a while as self employed or via your own Ltd and they've now required that you go via an umbrella due to IR35 or such and therefore have offered to share the pain with the rate increase. This is the exception not the norm.

It's a very long time since I had dealings with umbrella companies, and I know the law has changed a bit. I may be wrong, but I think the "uplift" (which I agree, doesn't really exist as such) is to prevent the employers NI taking the wage below the National Living / Minimum Wage. I recall reading some tweaks to the law to ensure that this was the case, as some agencies were paying rates at or just above the NMW but with all the deductions this took the pay below it. This may explain the confusion.

Net income absolutely has to be inline with NMW but I assumed that was a given and most who are going through umbrellas are at least a modest amount above NMW.

In fact with my contract with the umbrella my salary was officially NMW I then get a "bonus" which is earned money less salary, less employers NI less umbrella fee less apprenticeship levy. For contractors in FS space the "bonus" is clearly the majority of their earnings.

Sandtree

Jillanddy said:

Sandtree said:

Jillanddy said:

Sandtree said:

When you work for an umbrella company your hourly/daily rate has to cover all employment costs, you will normally see a fee charged by the umbrella that covers their time/efforts, insurances and profit and then all of the HMRC costs including both employee and employer taxes/NI.

So if you've agreed £20 an hour with the client or agency then its £20 per hour that goes to the umbrella... there is no other money being passed across to cover the employers NI or the PL insurance etc and the umbrella company has no other revenue stream than your £20 per hour.

In some circumstances clients or agencies may agree to uplift your rate to reflect these costs but thats generally when you've been with them for a while as self employed or via your own Ltd and they've now required that you go via an umbrella due to IR35 or such and therefore have offered to share the pain with the rate increase. This is the exception not the norm.

It's a very long time since I had dealings with umbrella companies, and I know the law has changed a bit. I may be wrong, but I think the "uplift" (which I agree, doesn't really exist as such) is to prevent the employers NI taking the wage below the National Living / Minimum Wage. I recall reading some tweaks to the law to ensure that this was the case, as some agencies were paying rates at or just above the NMW but with all the deductions this took the pay below it. This may explain the confusion.

Net income absolutely has to be inline with NMW but I assumed that was a given and most who are going through umbrellas are at least a modest amount above NMW.
.

They are now, but I don't think that was always the case for some of the very low paid. you know how it is - employers will exploit any loophole and sometimes the law has to do catch up. Look at zero hour contract as an example. The NMW wasn't introduced until 1999, which wasn't that long ago for some of us. But I do seem to recall some employers using this as a vehicle to get out of paying employers NI and reducing costs. No prizes for guessing which kinds of employers I am thinking of. 

I started working in the 90s so remember well my pre-NMW income working in a call centre.

You may be right but given you are legally an employee of the umbrella it would have had to be an intentional carve out in the NMW to allow them to pay you below rather than some clever thinking by agencies on finding a loophole. Obviously pre IR35 etc then many more of these people would have been "self employed" or such in which case NMW doesnt apply as its a B2B relationship and no employee involved.